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It was a few minutes after noon and I was late to meet a young hedge fund manager I call the Demon.

The Demon runs a small fund he started in the middle of 2009. It has struggled to gain traction with investors and currently manages less than $50 million.

When I arrived at the small restaurant in midtown where we're to have lunch, he was sitting alone at a table near the back of the place. He was already eating a large salad.

"This place serves the best Greek salad in all of New York City," he said. There was a twinkle in his eye when he used the phrase "Greek salad" — as if he had planned the meal for its symbolism.

And then I noticed that he had already ordered one for me.

The Demon's fund is based on a simple premise: Governments mismanage their economies. As a result, attempts to subsidize or bail out businesses or industries backfire. The Demon tries to profit from the "blowback."

"Governments don't even understand their economies. Politicians think that economics is more plastic than it is. So they try to tinker with the edges, building confidence. They think they have bazookas when they're wielding squirt guns," the Demon said.

Obviously, the Demon has a strong libertarian streak. In fact, we were introduced by a mutual libertarian friend of ours.

But the Demon has set himself up to profit from government expansions.

He roots for government rescues to be passed, and then bets on them failing. And that's why I call him the Demon.

He is eagerly anticipating an expansion of the European Financial Stability Facilityand a recapitalization of European banks. Because he thinks both will ultimately fail.

"Turning the EFSF into a monoline insurance company for European sovereigns will not prevent default, and will only temporarily stem fear," he explains.

He expects the EFSF expansion to temporarily calm markets, leading to tighter spreads on credit default swaps. But this effect will be fleeting. Eventually spreads will blow out again.

"Buying protection on European sovereigns has gotten very expensive. An EFSF confidence rally is exactly what I need to get a new entry point," he said.

The Demon has similar thoughts about the recapitalization of Europe's banking system. He thinks the banks will be recapitalized but that this will be insufficient. After an initial rally, he expects their stock prices to resume falling and credit spreads to widen.

"If we failed with Bank of America[BAC6.605-0.115(-1.71%)], how are our broke cousins in France, Italy and Spain going to succeed? They don't even have their central bank on their side," he said.

But this skepticism doesn't make the Demon hope for a better recapitalization. It makes him hope the European leaders get exactly the scheme what they are pushing for, and that the scheme fails.

When our salads were done, the Demon ordered a black double espresso.

He seemed in no rush to get back to his office.

"I'm not a day trader. I don't need to do anything until the Europeans move. Then I wait for a confidence rally and pounce," he said.

Then he smiled. It was a long, calm smile. Like a strong runner just before a race. Or, perhaps, like a Demon watching a soul's fall into damnation.